Gold Holds As Equity Dead-Cat-Bounce Folds

Tyler Durden's picture

10Y Treasuries hit a 1.60% handle as yields fell without a bounce all day. Equities managed a post-European-close bounce (notably to VWAP and unable to break above it) off pre-FOMC levels but that faded rapidly into the close of the US day session as volume and average trade size picked up. VIX traded over 17% (up over 1.4vols on the day). Gold held up better than stocks - especially given the strength in the USD - and remains well above pre-FOMC levels (holding its bounce into the close). Of the major US equity indices, only the Dow remains green from pre-FOMC as CRAAPL sees its worse 3-day slide in 5 months dragging NDX down (and high-beta Russell dropping fast). MS and GS are down 4.2% from pre-FOMC levels now as Financials are the biggest losers (just trumping Energy and Industrials) from when Ben opened his book. Healthcare remains the clear winner. WTI dived into the EU close but recovered to close at $90 (-3% on the week) but in general risk-asset correlations with US equities are extremely high (with risk suggesting more downside to come).


Gold remains a solid winner post FOMC as stocks are now below those levels. The USD and Treasuries are tracking each other strongly...


The Dow remains green from pre-FOMC but the rest of the indices are fading...


Morgan Stanley and Goldman Sachs are suffering post FOMC...


Interestingly, commodities bounce off the European close dive was sustained (as opposed to stocks fading)...



Correlations across asset-classes are extremely high (lower right) and broad risk assets led stocks lower (upper right) from lunch onwards. ETFs held together (upper left) with some noise from VXX and HYG but that faded rapidly into the close. On a super-long-term basis, stocks remain significantly over-priced relative to risk-assets (though we do not use this to trade it remains a useful pre-ECB/Fed indication of status quo)...



Bottom-line - this kind of flow suggests end of quarter rebalancing as the relative outperformance of stocks has been extraordinary. It certainly doe snot suggest a pre-amble to high beta chasing (as we dismissed last week) or a QEternity-inspired risk appetite into Q4...


Charts: Bloomberg and Capital Context

Bonus Chart: How much further for equities? hhmmm, bonds say quite a way...


Bonus Bonus Chart: AAPL's 3-day 5% slide is the largest in over 5 months...

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CPL's picture

Spot the PPT in action.


Eventually someone is going to just stop with the foreplay and just flash increase by typing a number.

Xibalba's picture

Every single branch of Government, yes that includes the Presidents Working Group on Markets aka. the PPT, has been an utter failure.

slaughterer's picture

Tomorrow will be vastly different.  Expect major change tomorrow.

Dr. Engali's picture

Isn't every day different? Life would suck if it wasn't. Btw....Looks like you're out an ounce. :->

fuu's picture

JPM Hater said both days in RED.


slaughterer We will close GREEN today and tomorrow. QE4 is a 'coming

JPM Hater001 I have an ounce says both are red.

slaughterer Done!

Dr. Engali's picture

Ah. My mistake. I look forward to seeing the outcome.

RSloane's picture

What major changes? Do I wear my Recovery Summer party hat? I think I still have it here somewhere.

Nothing To See Here's picture

These are not the economic recoveries you are looking for.

SemperFord's picture

Regarding the second to last chart, I thought no crash was allowed until after the elections? I don' think Ben expected this big of a drop from Qeternity unless it is a BTFD moment for those still playing "the Market"

CPL's picture

When you are fighting leveraged decay...well...there it is.


Painted into the corner

Yardfarmer's picture

gold holds. hold gold. 

disabledvet's picture

What else are holding tho? I agree...absolutely right. "Hold the gold." Those who told me to short silver this summer have just had their balls chopped off...AGAIN. I say anything that reduces costs...and by extension prices. There is no way that deficit does anything but stays high for a VERY long time. How does one successfully monetize and create a recovery then? No way you do it without healthy lending activity that's fer sure. And nobody lends with gold as their collateral. I say MASSIVE Army Divisions...and a new Aircraft Carrier Enterprise that is say...5,000 feet long by 2,000 feet wide.

q99x2's picture

The tungsten scare seems to have worked. Silver up for the session.

andrewp111's picture

So which one will bounce higher when dropped off a building onto a concrete street.  A real gold bar or a gold plated Tungsten bar? I'll bet the tungsten bounces higher since it is a hard metal that will not deform. In fact, it might even shatter.

ParkAveFlasher's picture

Hey, where are all the grammar police calling out "doe snot" in the "Bottom Line" section?

akak's picture

What, deer don't get head colds too?

bank guy in Brussels's picture

Please Tyler & everyone

Stop using that horrid, ugly and cruel 'dead cat bounce' phrase - the witty and smart Tyler Durden can certainly think of something else clever

The phrase is painful to many of us animal lovers

Cats are among the world's wonderful creatures ... if you have never known the love of a cat you are deprived of one of life's great joys

Why use such cruel imagery in speaking of loving creatures who are like babies in our arms

Please do banish that awful phrase

akak's picture

Live cats bounce just as well, sometimes better.

NotApplicable's picture

Not to mention, they always land on their feet!

JustObserving's picture

4 million cats are put to sleep in US shelters every year.  That works out to be one every eight seconds.

I would not worry about a dead-cat bounce terminology if we are killing so many every year just in the US.

Would you prefer "Dead bankster bounce?" 

Bastiat's picture

Yeah, that works.   Dead Bennie bounce?

Kitler's picture

Saw that behind the ski boat in "Weekend at Bernankes"

chump666's picture


'dead ben bounce'

delacroix's picture

why aren't we selling all that meat to asia?

EvlTheCat's picture

How does this suit you? We'll call it, 'brain dead PC Brussels idiot bounce' from now on?

EvlTheCat's picture

Go ahead and try to impose your foul language fine here waffle boy. 

magpie's picture

Maybe he's waiting for the dead animal quota directive from the EU commission.

EvlTheCat's picture

Yes possibly, the bureaucratic EU arm of PETA is mired in red tape.

CPL's picture

It's an english phrase.


The dead cat bounce.  If you don't like you can kick the dog.  Then choke the chicken.  Not too much though or people will think you are batshit crazy.  Especially if you go Ape over language.

CPL's picture

He could also be having kittens over nothing. So everyone should relax and not have a cow.  Otherwise it'll get noisy as geese around here.


English language uses animals as adjectives.

NotApplicable's picture

The cat is already dead, so what exactly is so cruel about it?

Or are you just beating a dead horse?

Honestly, if you're going to go to this much trouble, you should've thought of more to add, that way, you could kill two birds with one stone.

Instead, your post is a dead duck (or perhaps a dead cat on the line?).'s picture

When all else fails we can whip the horse's eyes and make them sleep and cry.

EvlTheCat's picture

No, he is to busy running around from forum to forum topic, like a chicken with its head cut off, offering politically correct opinions.

The Alarmist's picture

Try beating the dead horse with the dead cat!

Likstane's picture

Try making a cat drink after digging it up and riding it to water the horse!

blindchicken's picture

The phrase originates in sloppy thinking anyway.

If you throw a dead cat onto an inelastic surface it hardly will bounce.

I am too craven to present my alternative. Perhaps one could ask banzai to create a more proper image.


The Alarmist's picture

What I would be interested in seeing is if the dead cat rights itself during the fall.

RSBriggs's picture

Bullseye!  And that is the whole point....

andrewp111's picture

It is actually a very apt phrase. An animal corpse dropped off a skyscraper will make only a small bounce when it hits the street - nothing even remotely comparable  to the height it was dropped from. A dead cat bounce is supposed to be a small temporary bounce. Now a really cold frozen chicken or turkey will bounce much higher. And I'll bet a bar or coin made from a hard metal like tungsten will bounce even higher still. So for bigger bounces, we can have the frozen butterball bounce and the fake gold coin bounce.

zorba THE GREEK's picture

Some animal lovers would be less offended if the expression was changed to; "DEAD BABY HUMAN BOUNCE"

EvlTheCat's picture

Probably the same "pet parents" who screw up their "animal companions" so much they have to take them to psychologists.

andrewp111's picture

How about the Tungsten Bar Bounce?